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Real estate contracts must always be in writing in order to be enforceable. While it's not illegal to have an oral contract, courts historically will not enforce non-written real estate contracts. If you need a mortgage to complete a home purchase, all lenders require a fully executed -- and signed -- sales contract.

Oral Contracts

In most instances, oral contracts are legal. However, these agreements can be difficult, if not impossible, for a court to enforce. Without a signed, written contract, the court is asked to make a decision without evidence of the parties' agreement. Oral contracts are not illegal, because if both parties keep their "word," the transaction will work well. If the parties to an oral real estate contract keep their promises, a dispute will never reach the court.

Written Contracts

Parties can agree orally to buy or sell property, but if either one disputes the terms of the agreement, only written contracts are evidence of the agreement. Even credit card purchases over $25 require a signature of the purchaser. In the real estate world, oral contracts are seldom binding, even if non-involved parties heard the offer and acceptance by the buyer. Always demand real estate transactions to be in writing and signed by both buyer and seller.

State Law

Certain states do not allow parties to receive court-ordered judgment on oral real estate contracts. This forces parties to create and sign written contracts. For example, in California, during the offer to buy process, counter-offer forms have a paragraph called "Confirmation of Acceptance." This part of the form requires sellers to sign again that they indeed are accepting a final counter offer from the buyer.

Legal Issues

Often, courts view oral contracts as non-binding agreements, prohibiting a legal ruling. For example, your landlord tells you that he will sell you his rental home for $200,000. Two months later you tell the landlord that you will buy the property for that amount. Should the landlord say that he never offered to sell the property for $200,000 and the price is now $300,000, there's little chance a court will enforce the former oral contract. Even if you agreed on the spot to buying the property for $200,000, the contract was legally non-binding on the landlord and, therefore, unenforceable.